Access Bank Dangles Fresh US$500m Eurobond Issue, Oversubscribed by 200%

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Monday, October 4th, 2021 / 5:47 PM / By Adaeze Nwachukwu, Proshare Research / Header Image Credit: Access Bank


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As part of its US$1.5bn funding plan Access Bank Plc issued a further US$500m Eurobond Offer that was 200% oversubscribed last week. The bond was offered at a coupon roughly 3% higher than the earlier September 2021 Issue. Notwithstanding, the higher coupon and the oversubscription of the Offer suggest that international investors were prepared to take up the private Issues of top-quality emerging market corporations at the right price.

 

Access Bank has issued its third offering of US$500m Additional Tier 1 (AT 1) Eurobond Offer as part of a broad USD1.5bn funding Programme. The offer was at a coupon pricing of 9.125% with an over 200% order book subscription which peaked at over US$1bn. The oversubscription of the current Issue was 100% lower than the earlier September 2021 issue. Strong investor confidence towards the Offer indicated a positive perception of the bank's credit history and management strategy.

 

The current Eurobond Issue comes 17 days after the bank issued a US$500m Unsecured instrument with a 5-year tenor and a coupon rate of 6.125% with interest payable semi-annually in arrears. The instrument was oversubscribed three (3 )times, peaking at US$1.6bn. Both the present and earlier Issue became listed on the London Stock Exchange (LSE).

 

Access bank operates in 11 African Countries, Europe, the Middle East, and Asia, reflecting risk diversification of the institution's earnings. Although the Nigerian segment of the bank accounts for the most significant contribution in terms of profit, the H1 2021 result shows a reduction in profit contribution of the Nigerian business and an increase in profit before tax (PBT) from the rest of Africa and Europe (see table 1 below).

 

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Table 1: Access Bank's Profit Before Tax By Business Segment

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As stated before, increased activity was expected in the fixed income market in 2021, as private institutions expectedly take advantage of the low yields in 2020/2021. Currently, the total value of commercial papers (CPs) issued on FMDQ as of September 30, 2021, was US$1bn. UBA and Zenith Bank are the only corporate institutions with outstanding Eurobonds listed on FMDQ in the amounts of US$500 million each. UBA has a coupon rate of 7.375%, maturing on the 30th of May 2022, while Zenith Bank has a coupon rate of 7.75% on its current Eurobond Issue maturing on the 8th of June 2022 (see table 2 below).

 

Table 2: Outstanding Eurobond Issued By Banks

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Access bank's current Additional Tier 1 (AT1) Eurobond Issue was priced at 9.125%, implying a premium over the earlier senior bond Issue. The increase in debt size may have caused investors to insist on a larger coupon to compensate for a potential rise in default risk. Access Bank's recent entry into the Eurobond market could be strategic, on the back of a global liquidity glut and the bank's increasingly diversified continental risk portfolio.


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